an annual procedure to decide how much public spending there should be in a year ahead and what mix of taxation, charging for services, and borrowing should finance it. (Differs greatly from country to country)
the excess of government spending over tax collections. (G - T)
Public saving is negative
the excess of government tax collections over government spending. (T - G)
*Same as public saving
Crowding Out Effect
the tendency of increased government deficits to reduce investment spending; a situation in which the government, who can always pay the market interest rate, borrows heavily while businesses and other individuals also want to borrow, but can't afford the market interest rate.
payments that the government makes to the public for which it receives no current goods or services in return; a redistribution of income in the market system that do not directly absorb resources or create output.
Examples: social security, welfare, unemployment, etc.
the use of government expenditure and taxes to influence economic outcomes; dealing with government income and government expenditure; policy that uses government income and government expenditure as policy tools to achieve economic outcomes.
Expansionary Fiscal Policy
government policy that intends to increase planned spending and output; aims to raise output and can also raise inflation
Raise Government Expenditure and Lower Taxes
(Also known as Inflationary)
Contractionary Fiscal Policy
government policies that intend to reduce planned spending and output; aims to lower inflation and can lower output
Lower Government Expenditure and Raise Taxes
(Also known as Recessionary)
Automatic Fiscal Policy
Policies that are triggered by the state of economy;
Expansion: T goes up, G goes down, Deficits go down
Recession: T goes down, G goes up, Deficits go up
Discretionary Fiscal Policy
policies that are changed year to year by congress (or the president); requires action by the congress.
a form of direct lending that is high risk; buying ownership stake; a claim to partial ownership of a firm/ a share
a form of direct lending that is low risk; straight lending; a legal promise to repay a debt, usually including both the principal amount and regular interest, or coupon, payments; an interest-bearing security issued by the government, as awell as some companies and organizations
The central bank of the U.S. Controls the the supply of money and attempts to control interest rates.